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Land Commissioner: Funds may have short-changed schools

March 1, 2019

BISMARCK, N.D. (AP) — North Dakota lawmakers may need to fix the distribution of some oil tax revenue that may have shortchanged a pair of funds mandated by the state constitution that benefit schools.

At issue is whether revenue from the state’s share of extraction taxes from production on the oil-rich Fort Berthold Reservation should have been deposited in the funds, instead of the state’s general fund and oil-tax savings account.

North Dakota Land Commissioner Jodi Smith believes that more than $100 million of the revenue over the past decade should have been deposited in the common schools trust fund and the foundation aid stabilization fund.

State Treasurer Kelly Schmidt disagrees, saying advice from the state attorney general’s office years ago found that the distributions have been made correctly.

“We can only allocate and distribute funds based on the law,” Schmidt said.

Lawmakers and state officials are scheduled to meet Monday to seek a legislative correction if one is needed, said Republican Sen. Dwight Cook of Mandan, the chairman of the Senate’s Finance and Taxation Committee.

Cook said “ambiguous” language in the law that distributes the state’s share of taxes from oil production on the reservation has come up before. A bill to clarify the language was killed in a conference committee in 2011, he said.

Smith manages the state Land Department, which leases rights for grazing and rights to produce oil, coal and gravel from state lands. The Land Department manages several state trust funds, including the common schools trust fund that benefits public schools.

The state Board of University and School Lands oversees the Land Department. Gov. Doug Burgum is chairman of the board that also includes the state treasurer and Attorney General Wayne Stenehjem.

Smith said she has been directed by the board to work with legislative leaders to find a resolution, one that she and Stenehjem said could include reimbursing the funds over time.

“The statute is unclear and there is a legal argument to be made on both sides,” Stenehjem said. “I think everyone is trying to find a way so that everybody gets made whole.”

Stenehjem said his office has never made an official opinion on the matter, only advice given in a letter years ago.

Schmidt and Cook said that if it is determined that the funds were shortchanged, the money should only be deposited in the funds moving forward.

Burgum spokesman Mike Nowatzki said the governor is hoping for resolution.

“If it’s determined that dollars should have been allocated to those constitutional funds, he would support restoring the affected constitutional funds as soon as possible,” Nowatzki said.